Typically, an audio signal is produced (e.g., recorded) at a certain volume level, but then is played back at a different volume level. Unfortunately, this situation frequently poses a problem for perceived audio quality, due to the nonuniformity of human loudness perception. Specifically, sensitivity of the human auditory system varies with frequency and volume. For example, when watching a movie at low volume late at night, one might notice that the movie sound is reduced mainly or solely to dialogue, while other (e.g., background) sounds, such as footsteps, become inaudible. This happens because the human auditory system is not very sensitive to particularly low or high frequencies, and the severity of this reduction in sensitivity gets worse at low playback volumes.
It is, therefore, desirable to adaptively compensate for the perceived differences in volumes of sound components at any playback level in such a way that the perceived relative loudnesses of such components is unchanged even if the playback volume is changed. In the example above, this means that background sounds, such as footsteps, will be heard as equally loud compared to the dialogue at any playback level.
The idea of loudness compensation may be traced back to the 1930s. The 1935 Grunow “Tombstone” table radio receiver used analog circuitry to produce a loudness compensation frequency response curve that 1) boosts the bass strongly and treble weakly, and 2) varies with the playback volume set by the user. This circuitry essentially solidified the basic principle of loudness compensation: bass and treble boost that varies with the playback volume set by the user (i.e., the position of the playback device's volume knob).
Modern loudness compensation technologies are not very different, except that digital dynamic equalizers, shelf filters in particular, are deployed to enable an audio engineer to fine-tune the frequency range and level of boost to the ear's liking. This fine-tuning is usually done for a couple of playback levels and then interpolation is used to accommodate other playback levels.